Mark v. State Controller

SHINN, P. J. This is an appeal from an order .overruling the objections of Natalie D. Mark and Louine D. Boyer, legatees and devisees of decedent Mellie M. Darby, to the report of the inheritance tax appraiser, and fixing the amount of an inheritance tax due and payable from them.

The facts are not in dispute. By deed dated August 14, 1924, deceased acquired real property which is the subject of the tax here in controversy for a consideration of $28,500 furnished entirely by her. She was the mother of three children. In 1929, she conveyed the property to a third party, who simultaneously reconveyed to her and her two daughters, Natalie and Louine (appellants here), as joint tenants. The one-third interest thus transferred to each of the daughters was intended as a gift for the purpose of equalizing a gift, of $10,000 previously made to their brother James.

The property was held by the mother and two daughters as joint tenants for nearly 17 years. On March 21, 1946, Natalie and her mother conveyed their interests therein to Louine; and on March 25, 1946, Louine reconveyed an undivided one-third interest to her mother, Natalie, and herself, respectively, as tenants in common. These conveyances were made upon the advice of counsel that if upon the date of death of the deceased the property stood in joint tenancy, it was likely that the entire value thereof would be included in the estate of the deceased for inheritance tax purposes. The purpose of these transfers was to destroy the joint tenancy and create a tenancy in common, in order to reduce the potential inheritance tax liability. At the time of the transfers, in March, 1946, decedent had been ill for some time but was not critically ill. She died on September 10,1946.

After a hearing the court made findings that the transfers in March, 1946, had been made in contemplation of death [98]with the intent and purpose of avoiding the payment of an inheritance tax which would become due from appellants by reason of their survivorship as joint tenants; and that on the date of Mellie M. Darby’s death, appellants were each vested with an undivided one-third interest in said real property, which interests were derived from the decedent without a valuable or adequate consideration. Upon these findings the court confirmed and approved the report of the inheritance tax appraiser assessing a tax upon the value of the one-third interest transferred to each of appellants.

The sole question for our determination is whether the evidence supports the conclusion that the conveyances of March, 1946, were taxable transfers, .within the meaning of sections 13641 and 13642 of the Revenue and Taxation Code. Those sections read: ‘ ‘ § 13641. Transfers without consideration. Any transfer specified in this article made during lifetime by a resident or, if the property transferred is within this State, by a nonresident, by deed, grant, bargain, sale, assignment, or gift, without a valuable and adequate consideration, is a transfer subject to this part. . . . ‘Valuable and adequate consideration’ is a consideration equal in money or in money’s worth to the full value of the property transferred. ” “ § 13642. Same: Transfers made in contemplation of death. A transfer conforming to Section 13641 and made in contemplation of the death of the transferor is a transfer subject to this part. ‘Contemplation of death’ includes that expectancy of death which actuates the mind of a person on the execution of his will. The term is not restricted to that expectancy of death which actuates the mind of a person making a gift causa mortis.”